California's lawmakers hope to encourage "green growth" by applying tactics other states have used to poach California businesses.

Tax credits and incentives for alternative fuels and renewable power could drive economic growth in areas of the state that have lost jobs and seen diminished economic growth, according to long-time Republican and Democratic lawmakers from the Assembly Committee on Jobs, Economic Development & The Economy. Overall, the number of California-owned businesses expanding in California shrank as the number of out-of-state jobs created by California-owned companies rose, according to trends spotted by the Public Policy Institute of California think tank.

Instead of bemoaning the jobs lost to other states, "we figure out what they are doing right, and address that," says Assemblywoman Bonnie Garcia, (R-Cathedral City), a long-time Republican committee member. "It's not enough to bring them here; you have to keep them here."

Garcia's district abuts Arizona and Mexico, both prime out-of-state lures for district businesses, she said. New incentives to build renewable power plants in her district may provide a similar draw.

California lawmakers, including Garcia and Assemblyman Juan Arambula (D-Fresno), have introduced numerous bills designed to provide tax credits and related incentives to alternative fuels manufacturers, providers of renewable power and other "green" businesses in the state.

Arambula, who chairs the committee, has introduced several bills—including AB 1506 and AB 1620—to offer targeted incentives that "help support the expansion of the clean technology market," particularly for small businesses.

He says California "can and should" encourage clean, innovative companies to expand their businesses in the state.

Green Nightmares?—Environmental Regulation

Environmental regulations may create new markets, but they also can make bad situations for businesses, according to Assemblyman Jim Silva, (R-Huntington Beach), the committee's vice chair. In Silva's experience as a former county supervisor and after serving on numerous boards and commissions, the state's constant efforts to strengthen environmental rules prompts businesses to shift to less-expensive states to do businesses.

For instance, Microsoft, headquartered in the state of Washington, and Hewlett-Packard Co., headquartered in California, must compete in many of the same markets although they may face completely different environmental compliance costs. If compliance costs rise too high, Hewlett-Packard could seek another state where its profits would not go toward meeting increasingly restrictive rules, Silva said.

In Silva's estimation, a "combination" of tax credits and a lessening of some of the environmental rules could make a better atmosphere for California businesses. At the very least, California regulators must better weigh the potential economic effects of regulation, he says.

However, Arambula says the state's environmental quality also could lure companies and their families to California. "Having a good physical environment is attractive" to companies, he notes.